Community Meeting Atwater, California CFD 1-90 July 30, 2009

What is Mello Roos? Mello-Roos Community Facilities Act of 1982 Mello-Roos Community Facilities Act of 1982 Legislative response to Prop 13 Legislative response to Prop 13 Provides for Special Tax Levy within defined geographic area – Provides for Special Tax Levy within defined geographic area – Initially required two-third of the qualified electorate Initially required two-third of the qualified electorate Can generate facilities from broad range of facilities Can generate facilities from broad range of facilities Way for developers to shift infrastructure costs Way for developers to shift infrastructure costs

More about Mello Roos Authorizes the district to issue tax-exempt bond secured by land within the district Authorizes the district to issue tax-exempt bond secured by land within the district If a parcel does not pay the special tax levy… If a parcel does not pay the special tax levy… Public Agency can foreclosure Public Agency can foreclosure Proceed from foreclosure insures the bond holders receive interest and principle payments Proceed from foreclosure insures the bond holders receive interest and principle payments Bonds are secured by land within the district Bonds are secured by land within the district Do not risk Public Agency General Fund Do not risk Public Agency General Fund Tax-exempt bonds – typically lower rate than conventional construction financing Tax-exempt bonds – typically lower rate than conventional construction financing

Community Facilities District 1-90 (CFD 1-90) Created in July, 1990 Created in July, 1990 Authorized to borrow up to $20 million to pay for infrastructure improvements. $17.5 million in bonds were issued. Authorized to borrow up to $20 million to pay for infrastructure improvements. $17.5 million in bonds were issued. Repayment was to be made by those who owned the land and, as homes and businesses were built, the homeowners and businesses located in the CFD. Repayment was to be made by those who owned the land and, as homes and businesses were built, the homeowners and businesses located in the CFD.

Community Facilities District 1-90 The $17.5 million paid for: The $17.5 million paid for: Street improvements Street improvements Water and sewer main extensions Water and sewer main extensions Underground utility extensions: Underground utility extensions: electricity electricity natural gas natural gas cable TV and cable TV and phone service phone service

But… The recession of the early 1990’s slowed homebuilding in CFD The recession of the early 1990’s slowed homebuilding in CFD The closing of Castle Air Base in 1994 hurt the local economy and further slowed growth in the area. The closing of Castle Air Base in 1994 hurt the local economy and further slowed growth in the area. By 1994, non-payment of taxes threatened to put the District in default. By 1994, non-payment of taxes threatened to put the District in default. In 1995, the City issued bonds to restructure the debt and avoid a default. In 1995, the City issued bonds to restructure the debt and avoid a default. Since 1995, the taxes collected each year from the land owners and the homeowners in the CFD has not raised enough money to keep the debt current and repay this debt by Since 1995, the taxes collected each year from the land owners and the homeowners in the CFD has not raised enough money to keep the debt current and repay this debt by 2015.

Currently in CFD 1-90 In 2006 the all debt payment were current and the reserve fund was made whole In 2006 the all debt payment were current and the reserve fund was made whole Homeowners in the CFD currently pay enough special taxes to pay the bond debt service. Homeowners in the CFD currently pay enough special taxes to pay the bond debt service. Homeowners pay based on the square footage of their home. Homeowners pay based on the square footage of their home. The amount each homeowner pays increases by 2% each year when there is not sufficient tax revenue to make the annual debt service. The amount each homeowner pays increases by 2% each year when there is not sufficient tax revenue to make the annual debt service. The remaining undeveloped land in the District has large tax liens. The remaining undeveloped land in the District has large tax liens.

CFD 1-90 Debt Service 2009 Bonds structured in two series A and B. Bonds structured in two series A and B. Debt service due in Fiscal Year : Debt service due in Fiscal Year : Series A debt service approximately $1.2 million Series A debt service approximately $1.2 million Series B debt service approximately $0.6 million Series B debt service approximately $0.6 million All Debt service are is current at this time All Debt service are is current at this time All required reserve funds have been restored All required reserve funds have been restored August 31, 2008 reserve fund $1,357,201 August 31, 2008 reserve fund $1,357,201

We have Improved the Situation 2009 refinancing 2009 refinancing Took advantage of Interest rates at a 40 year low Took advantage of Interest rates at a 40 year low Out year CFD debt was financed at 7 ¾% Out year CFD debt was financed at 7 ¾% CFD was refinanced, the interest rate were be lowered to approximately 6% CFD was refinanced, the interest rate were be lowered to approximately 6% Restructuring leveled debt service on series A bonds Restructuring leveled debt service on series A bonds No extension of term No extension of term Final year of debt service remains at 2015 Final year of debt service remains at 2015

Development Status Total Parcels in CFD 9601,1801,183 Residential Parcels 9451,0201,036 Undeveloped Parcels

Going Forward Going Forward Increase delinquencies in District is a concern Increase delinquencies in District is a concern We expect these to continue until the economy improves We expect these to continue until the economy improves Foreclosure Covenants Foreclosure Covenants Require foreclosure procedures for parcels delinquent by $3,000 as long as the reserve fund is maintained Require foreclosure procedures for parcels delinquent by $3,000 as long as the reserve fund is maintained Increase noticing helps prevent foreclosure proceedings Increase noticing helps prevent foreclosure proceedings Legal issues related to foreclosures have reached settlement Legal issues related to foreclosures have reached settlement Last year of Debt Service remains at 2015 Last year of Debt Service remains at 2015

Question and Answer Period